The United States Securities And Exchange Commission (SEC) has taken action against crypto exchange Gemini and crypto lender Genesis Global Capital, a subsidiary of Digital Currency Group (DCG). The SEC alleges that “through this unregistered offering, Genesis and Gemini raised billions of dollars in crypto assets from hundreds of thousands of investors.”
SEC Moves Against Gemini And Genesis
The United States Securities And Exchange Commission (SEC) announced Thursday that it has brought charges against Genesis Global Capital LLC and Gemini Trust Company LLC, for the unregistered offering and sale of securities to retail investors through Gemini’s “Earn Crypto Assets” lending program. Genesis is a part of a Digital Currency Group (DCG) subsidiary. The regulator noted:
Through this unregistered offer, Genesis and Gemini collected billions of dollars in crypto assets from hundreds of thousands of investors.
The SEC outlined that in December 2020, Genesis negotiated an agreement with Gemini to offer Gemini clients, which includes retail investors in the US, “an opportunity to lend their crypto assets to Genesis in exchange for Genesis’s promise to pay interest.”
The two companies offered the “Gemini Earn” program to lend cryptocurrency to retail investors between February 2021 through November 2022. The securities regulator added: “More than 50 crypto assets were eligible for investment in the Gemini Earn program, including bitcoin, ether, USD Coin, and dogecoin.”
According to the SEC:
Gemini, as the agent, offered crypto assets to Genesis, to facilitate the transaction. Genesis then had the discretion to decide how to use the investors’ crypto assets to generate income or pay interest to Gemini Earn investors.
Genesis Halts Withdrawals
The SEC also highlighted that Genesis launched in November that they would no longer allow Gemini Earn investors to withdraw crypto assets “because Genesis lacked sufficient liquid assets to meet withdrawal requests following market volatility in the crypto asset market.” As of today, “Genesis had approximately $900 million in investor assets from 340,000 Gemini Earn investors,” the SEC noted.
Gemini cancelled the Gemini Earn program earlier in the month and as of today, Gemini Earn retail investors are still not able to withdraw their crypto assets.
Last week, Gemini co-founder Cameron Winklevoss published an open letter to DCG Chief Executive Officer Barry Silbert regarding the withdrawal freeze and requested a response from Silbert in an email. The DCG boss sent a letter to shareholders in answer to the allegations.
Gemini Co-Founder Brands SEC Action as “Super Lame”
After the SEC’s lawsuit against the two crypto-firms was declared, Tyler Winklevoss, another Gemini co-founder, took to Twitter to criticize the securities watchdog. He stated that the Gemini Earn crypto lending program was regulated by the New York Department of Financial Services (NYDFS).
Additionally, Winklevoss disclosed: “We have been in discussions with the SEC about the Earn program for over 17 months… They never raised the possibility of any enforcement action until Genesis halted withdrawals on November 16.” He opined:
Despite these discussions, the SEC chose to notify us by announcing its lawsuit to the media. Super lame.
“It is unfortunate that they are prioritizing political points rather than helping us further the cause of Earn’s 340,000 users and other creditors,” The Gemini co-founder concluded.
What do you think the SEC should have done with regards to Gemini and Genesis over the Earn program for cryptocurrency lending? Let us know your thoughts in the comments section.
